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Nigeria Individual - Significant developments

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Tax Appeal Tribunal rules that withdrawal of voluntary pension may be taxable but it is not the responsibility of the employer

The Lagos Internal Revenue Service (LIRS) following a tax audit for 2013 and 2014 years of assessment issued a Notice of Refusal to Amend (NORA) to Nexen Petroleum Nigeria Limited (“the company”). The LIRS assessed the company to additional liabilities on the grounds that the company had under remitted Pay As You Earn (PAYE) tax by taking statutory tax relief for Voluntary Pension Contributions (VPCs) made by its employees to pension fund administrators (PFA).

The Tax Appeal Tribunal's decision addressed the following key issues:

  1. That all pension contributions, including voluntary pension contributions without any limit, are tax deductible
  2. There is no requirement for the employer to ensure that VPC was not withdrawn by the employee within a period of time to qualify for tax deduction on the contribution
  3. That the agency responsibility of an employer to deduct and remit PAYE does not extend to any tax that may become payable upon withdrawal of voluntary pension contributions by an employee from the PFA

Tax Appeal Tribunal says gratuities are not taxable

Previously, section 3 of the Personal Income Tax Act of 1993 (PITA 1993) – i.e. the charging section – imposed tax on gratuities, and the 3rd Schedule to the Act exempted gratuities up to N100,000 from tax. The implication was that gratuities in excess of N100,000 were subject to tax.

However, section 3 of PITA 1993 was subsequently amended by the Finance (Miscellaneous Tax Provisions) (No.3) Decree (1996 Decree) removing “gratuities” from taxable income. However, the exemption under the 3rd Schedule was not amended. This created an apparent conflict in that while on one hand section 3 did not specifically mention gratuities as taxable, the 3rd Schedule inferred that gratuities in excess of N100,000 are taxable. This conflict created an uncertainty as to whether gratuities are subject to tax or not. The Tribunal stated that gratuities are not subject to tax

LIRS to issue new tax identification numbers to taxpayers

The Lagos State Internal Revenue Service (LIRS) on 30 May 2019 issued a Public Notice informing the public of the new Tax Identification Number (TIN) which will be issued to every individual, registered business and incorporated companies.

The new TIN is part of the deployment of a new tax administration system by the LIRS called the Lagos State Government Electronic Banking System (LASG-EBS) and the integration of the LASG-EBS Taxpayers Identification Digit (PID) with the Joint Tax Board (JTB) nationwide TIN. The new TIN which will provide individuals and companies access to the LASG-EBS (a biometric based and linked to the Bank Verification Number (BVN) of the individuals or companies).

Federal Government of Nigeria introduces New Electronic Yellow card for Travellers

The World Health Organisation (WHO) recommends that travelers are vaccinated to prevent the transmission of yellow fever (YFV) with specific requirements. According to the International Health Regulations (IHR) 2005, countries may require a proof of vaccination from travelers as a condition for entry. They may also take certain measures if an arriving traveler has no yellow fever certificate (or yellow card).

Following an amendment of the IHR 2005 effective 11 July 2016, the validity of a certificate and protection offered by the vaccination changed from 10 years to the life of the traveler vaccinated. Vaccination is recommended for travelers aged 9 months and older.

LIRS appoints employers to deduct and remit capital gains tax on compensation for loss of employment 

The LIRS has issued a Public Notice mandating employers (collecting agents) to account for and remit CGT on termination benefits and any other capital sum paid to disengaging employees. The collecting agents are required to file, alongside their respective annual returns, a statement showing all recipients of capital sums paid by the collecting agent in the format provided by the LIRS. Nil statements are to be filed where applicable. The appointment of collecting agents for CGT purposes as contained in the Notice is effective from 1 January 2019.

The Pension Reform Bill 2014

The 2014 Pension Reform Bill has been signed into law to replace the old pension law, which has been in operation since 2004. One of the key changes to the Act includes the increase in minimum contribution from 7.5% of basic pay, housing, and transport allowance to 10% of monthly emolument for employers, and a change from 7.5% of the same basis to 8% of monthly emolument for employees.

Also, a private sector company is required to participate in the pension scheme where it has at least 15 employees, instead of five employees based on the old law. Employers affected by these changes need to take immediate steps to ensure full compliance.


Last Reviewed - 31 July 2019

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Nigeria contacts
Taiwo Oyedele Title = Taiwo Oyedele width=55px
Taiwo OyedelePartner / Head of Tax & Regulatory Services+234 1 271 1700 ext. 50002
Russell Eastaugh Title = Russell Eastaugh width=55px
Russell EastaughPartner / Director General Tax Services+234 1 271 1700 ext. 50001
Emuesiri Agbeyi Title = Emuesiri Agbeyi width=55px
Emuesiri AgbeyiPartner / Director Tax and Private Wealth Services+234 1 271 1700 ext. 50006
Kenneth Erikume Title = Kenneth Erikume width=55px
Kenneth ErikumePartner / Director Tax Reporting & Strategy+234 1 271 1700 ext. 50004
Chijioke Uwaegbute Title = Chijioke Uwaegbute width=55px
Chijioke UwaegbutePartner, Insourced Solutions for Tax+234 1 271 1700 ext. 54031
Seun Adu Title = Seun Adu width=55px
Seun AduPartner / Director Tax and Transfer Pricing+234 1 271 1700 ext. 52001
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